11/05/2009 @ 6:00PM

Your Online Growth Serum

Every single minute, 20 hours of free video is uploaded to YouTube. This colossal library garners 1 billion views per day. In January 2009, 147 million people in the U.S. watched an average of 101 videos each.

You can marvel at the mopes who bother to post their pratfalls, pet tricks and musical covers, but you can’t deny the power of this platform. The question for business owners: Is YouTube a one-off hit maker or a strategic marketing tool?

Lauren Luke–or Panacea81, as she’s known on YouTube–is an avid believer. Luke started posting cosmetics tutorials on her YouTube channel three years ago (a channel is each user’s online video repository). Since then, Luke has collected around 295,000 subscribers–these are folks who have agreed to receive e-mail updates from video makers–and has racked up nearly 8.6 million views of her content. The British Broadcasting Corporation’s YouTube channel, by contrast, has only managed to draw 78,499 subscribers and around 5 million views.

Luke, 27, recorded her first videos from her bedroom in Newcastle, England, in July 2007. Originally she used YouTube to promote her make-up business on
eBay
. Since then, Luke has developed her own make-up line, now sold in over 130 Sephora stores; she has also published a book, landed a weekly column with the Guardian newspaper and will star in her own Nintendo DS game. This year her company, Soho Beauty, along with her other interests, will clock roughly $1 million in sales.

Luke has recorded 218 videos. Her first efforts didn’t include any speech, just some music playing in the background. Now she gives step-by-step directions. Tutorials of specific celebrities’ looks are especially popular. Search for “Leona Lewis song” and you’ll come across the many Leona Lewis-inspired how-to videos Luke has filmed.

Luke says the key to using YouTube is truly connecting with viewers. Occasionally, Luke records a diary entry where she talks about business ideas and future ventures. She never endorses or promotes products she hasn’t tried. Luke is adamant that people wanting to use YouTube as a strategic tool should “make an effort to keep everyone in the loop so they feel like they have a one-on-one relationship with you.”

A year ago, Luke became a member of the YouTube Partnership Program, allowing her to take a slice of the ad revenue her channel generates. Standard users can only post videos up to 10 minutes long; the Partnership Program gave Luke extra freedom to buff her brand by creating longer films and customizing her channel with logos. YouTube is such a powerful driver of eyeballs, says Luke, that she spends zero money on any other form of marketing. “I won’t leave YouTube unless everything blows up and YouTube disappears,” she vows.

Michael Buckley is another YouTube-spawned success. Buckley, 34, is the creator of What the Buck, a show on popular culture, ranked by YouTube as its No. 1 entertainment show with 180 million views thus far. He too has an ad-sharing arrangement with YouTube. Annual sales of his home-grown business exceed $100,000.

Even traditional businesses are making hay on YouTube. Blendtec, a maker of commercial and residential kitchen blenders in West Orem, Utah, boasts 212,823 subscribers. “We wanted to make our products more visible and build our brand,” says Jeff Robe, director of marketing. “We needed to show people that we have the world’s strongest blender.”

Blendtec’s videos, which the company started posting in 2006, feature blender inventor Tom Dickson demonstrating how his machine can effortlessly take on all manner of objects–from marbles to iPhones. On YouTube, that kind of bizarre destruction makes for “compelling video,” says George Wright, Blendtec’s vice president of marketing and sales.

Like Lauren Luke, Wright also believes YouTube is about building a close relationship with customers. That means owning up to a mistake when the company makes one. In 2007, Blendtec posted a video of Dickson blending what he said were neodymium magnets, when in fact they were ceramic magnets. Small distinction, perhaps, but total authenticity is the best policy in that medium.

Wright doesn’t just rely on shock value–he tracks viewers’ responses by monitoring who comments on a particular video. It turns out massacring different items attracts different demographics. “Blending a [copy of] ‘Halo 3′ will attract a different person than blending a golf club,” says Robe.

Since Blendtec made its YouTube debut, Robe crows, annual sales of the company’s consumer blenders have shot up eightfold, from hundreds of thousands of dollars to millions (the company wouldn’t release specific figures). “YouTube is a highly effective tool, but must be part of a broader strategy,” he says. “If it isn’t, then you’ve already missed your mark.”